CRITICAL MASS

The ‘polluter-pays principle’ is a concept so intuitive, yet so rarely implemented. Since the Industrial Revolution, we have been depleting our natural capital – resources and environment – at a scale that is unsustainable. We have been digging up these finite natural resources and using them in a way that returns pollution to the environment at such a rapid rate as we have not been facing the true costs. The driver of a traditional motor car powered by petrol or diesel pays neither the full cost of creating the fuel source in the first place, nor the environmental damage resulting from emissions released from the fuel’s combustion. If only the polluter were to pay the true price of his actions – so the theory goes – the level of polluting consumption would be reduced to a more optimal level.

Why does this so often not happen, and does the Molden-Leach Conjecture put forward in my new book with Professor Felix Leach, Critical Mass, provide a new opportunity to implement the polluter-pays principle for cars?

Oxford has a strong tradition of thinking on this topic, from my inspirational grounding by Peter Oppenheimer and Michael Bacharach at Christ Church, to the latest writings of Professor Dieter Helm at New College, all taking place in a city that is at the vanguard of traffic management policies – sometimes well-founded and sometimes distinctly dubious.

Most importantly, Critical Mass arises from a common cause made with Professor Leach at Keble College, a specialist in mechanical engineering, and the ideal intellectual counterpart to my experience in real-world emissions testing through my company, Emissions Analytics.

The polluter-pays principle runs into an immediate problem, if you cannot define and measure the relevant pollutants, or ‘externalities.’

We might be confident that air quality problems are caused by nitrogen oxides, or that climate change results from carbon dioxide from exhaust pipes, but what happens if we are not measuring them correctly, or we only have a partial understanding of the problem?

As it happens, we were not measuring nitrogen oxides accurately, and that became incarnated in the Dieselgate scandal of 2015. For electric vehicles, there are plenty of carbon dioxide emissions embedded in their manufacture, even as they have no tailpipes. If we apply the polluter-pays principle to only part of the problem or based on inaccurate metrics, the theory of second-best in welfare economics suggests we might even make the original problem worse. But if we include all pollutants, we may end up with an intractably complex tax system. Resolving this dilemma was the inspiration for Critical Mass.

Originally, the question was how to simplify the consumer choice problem: how do I choose the most environmentally friendly car? In fact: if you are only allowed to have one piece of information to select the greenest car, does one piece of information exist and, if so, what is it? We analysed evidence for dozens of vehicle pollutants, including from their manufacture and end-of-life disposal, not just from their use. The scope was wide to bring in not just emissions but other externalities such as noise, safety and infrastructure impact. We correlated each of these emissions against a wide range of variables describing the vehicle specification and usage to see which had the closest relationship with each of the pollutants.

Although we had a strong hunch that the answer was the vehicle’s empty mass, we were struck by how strong the relationship proved to be. In fact, of all regulated pollutants that remain a problem, 83% are strongly related to vehicle mass – the evidence to support this is set out in the book.

But the significance of the finding is that it makes the application of the polluter-pays principle to vehicle-related pollutants practical. We do not claim that mass is a perfect proxy for all pollutants, but it is good enough. Put another way, we are trading a small amount of accuracy for a radical simplification of the problem of defining the target pollutants. As the mass is actually correlated with the rate of creating emissions, if the mass is multiplied by the miles a car travels, you have a metric for the total pollution burden, and it is on this that an efficient environmental tax should be based.

With simplicity comes another important benefit. The system would be hard to cheat. Vehicle mass is not only easy to understand, but easy and cheap to check. In contrast, for example, vehicle regulation since at least 1992, with the introduction of the Euro standards, has relied on complicated, expensive and specialist tailpipe checks. As a result, when manufacturers started manipulating their emissions to exploit the difference between laboratory tests and reality, almost no-one noticed. And the Dieselgate scandal continues to throw a long, distorting shadow over the motor industry and car buying.

The City of Oxford is a living example of inaccurately targeted incentives, in the form of the Zero Emission Zone. As the entry charge is targeted on the type of powertrain, it gives a disproportionate incentive to electric vehicles, even though they typically come with higher embedded and tyre emissions, and implications for vehicle safety and impact on road infrastructure. As a result, in Oxford, as with many other cities, we are seeing big, heavy cars, with all their downsides. Were the entry charge to be based on vehicle mass, it would incentivise smaller, lighter vehicles, which come with a lighter impact on the world. It is important to note that this would not lead to a return to air-polluting combustion vehicles, as all vehicles from about 2018 genuinely conform to tough tailpipe regulations, unlike their predecessors.

The mission for simplicity, diligently applying Occam’s razor, has an importance that goes beyond taxing emissions appropriately, and applying the polluter-pays principle. That is because many dubious practices hide in or arise out of complexity. We are living this right now. As emissions have been hard to define and measure, governments have resorted to picking winning technologies, and banning those out of favour – which we are seeing with electric vehicle mandates and internal combustion engine bans. These choices are crude and suboptimal, most notably as many combustion engine vehicles have lower all-round pollution than heavier electric vehicles. But worse, such a dynamic sets up destructive loops of rent-seeking: market players profiting more by investing in influencing governments and regulations, rather than investing in making better products that consumers want. At the start of 2025, the European car industry is exactly at this point. It has lobbied heavily to influence vehicle laws, mandates and subsidies, and is rapidly losing market share because they are building vehicles that are poor value for consumers. And they are often big, heavy and, therefore, nowhere near as good for the environment as we are promised. We are, therefore, at the point of Critical Mass. Nick Molden would welcome comments and questions on this concept, and can be contacted at nick@emissionsanalytics.com.